Asia Markets recap: China data bum the markets

March 12, 2014, 7:16 PM ET

Reuters

Welcome to the Asia Markets live blog, a running account of what the region’s stock markets are doing, along with other news. Today, China’s rush of economic data —all of them — print below expectations , while New Zealand becomes the first developed economy to hike rates this cycle.

New Zealand today became the first developed country to raise interest rates in the easy-money, post-crisis Western world.

After three years with the policy cash rate at a record-low 2.5%, the Reserve Bank of New Zealand added a quarter-point in an effort to keep inflation at bay.

On the one hand, the move was long expected (MarketWatch and others have been writing about this for some time). But then, comments from RBNZ Gov. Graeme Wheeler & Co. that rates would likely continue rising by another couple points to keep inflation around the 2% target was enough to kick the Kiwi dollar up to 85.18 U.S. cents currently from around 84.74 cents just prior to the hike. (Read more here.)

Meanwhile, stocks weren’t so keen on the move, with the NZX 50 currently down 0.2%, as compared with a higher open for the Australian market.

Now in terms of the currency, the RBNZ isn’t very keen on a rising New Zealand dollar. But BK Asset Management managing director Kathy Lien says this won’t stop the Kiwi from gaining, or the RBNZ from hiking:

“The central bank warned that current levels of the exchange rate not sustainable, but these were the exact same words used at the last meeting and clearly the exchange rate has not prevented the RBNZ from tightening,” Lien wrote following the policy decision.

And with the statement signaling tighter policy yet to come, Lien said “we expect the New Zealand dollar to extend its gains, climbing to fresh one-year highs versus the greenback in the near term.”

Australia’s trading a little higher this morning (S&P/ASX 200 up 0.2%), and it’s all about the miners.

The big iron-ore names have struck it rich, it seems, after spot iron-ore prices at last halted their plunge and bounced a bit. Whether that bounce is of the “dead cat” variety is beside the point for now, as Fortescue Metals is up 4% and Atlas Iron is 3/8% higher, not to mention a 3.1% gain for Oz Minerals and a 2% advance for Rio Tinto. (BHP Billiton is up a milder 0.8%, in case you were wondering.)

“There will certainly be a few sighs of relief today that the carnage associated with the iron-ore price paused last night, as the spot price lifted a couple of percent to close at $107.40 [per metric ton], a small but welcome bounce from the previous session,” Rivkin Securities CEO Scott Schuberg wrote in a note out this morning.

And gold, let’s not forget gold. The Comex futures for the yellow metal hit their highest settlement in six months in New York, and so of course, Newcrest is up 1.8%, Evolution is up 2.1%, and Kingsgate is up 3.2%.

That said, there are plenty of event risks lurking in today’s schedule. For one thing, Australia’s employment data for February is due out at 11:30 a.m. Sydney time (8:30 p.m. U.S. Eastern time).

And more importantly, China’s February numbers for retail sales, industrial output and fixed-asset investment are slated for 1:30 a.m. Eastern time — the Sydney bourse will be closed by then, but any surprises will get baked in at tomorrow’s open.

On a final note, shares of Leighton Holdings remain untraded after top shareholder Hochtief AG sweetened its bid to buy additional stock in the contractor. The move has prompted Chief Executive Officer Hamish Tyrwhitt to leave, along with the chief financial officer, all at the request of Hochtief, Dow Jones Newswires reports.

Japan’s benchmark Nikkei Average is up 0.4% in the early minutes, recovering from a 2.6% body slam for the index yesterday. Then again, the broader Topix is flat, so it’s the blue chips leading the gains, a phenomenon that sometimes (but not always) indicates particularly active foreign buying.

The yen isn’t providing much support — with the dollar changing hands at ¥102.82, not too much changed from the day before — but on the upside, core machinery orders data surprised well to the upside. Core orders (which exclude volatile power-utility and shipbuilding orders) soared more than 13% in January, almost double the 7.5% gain tipped in a Wall Street Journal/Nikkei survey of economists.

The data haven’t shaken the market, but some industrials are seeing mild gains, with Fanuc up 0.4%, and Mitsubishi Heavy Industries rising 1.1%.

A more solid advance is found in the tech space, where Renesas Electronics is sporting a 3.5% jump, and Tokyo Electron has improved by 2.5%, while TDK is up 1.1%, and Fujitsu is ahead by 1.3%.

Heavily weighted telecom Softbank is up 0.9% as Chairman Masayoshi Son continues his push in Washington for approval of Softbank’s Sprint unit to buy rival T-Mobile US.

Meanwhile, the Nikkei Asian Review is reporting that convenience-store name FamilyMart should see a record pretax profit of ¥47 billion ($452 billion) for the fiscal year that ended in February. That would be great, except that FamilyMart had previously forecast ¥47.8 billion, and Kim Eng Securities says the market consensus is for ¥47.6 billion. Ergo, FamilyMart shares are down 1.8%.

Last month, the unexpected 3,700 drop in jobs had shaved about half a U.S. cent off the Aussie dollar (see previous Asia blog), and today’s data boosted the currency by a slightly larger margin — the Australian dollar is currently at 90.59 U.S. cents from 89.90 cents just ahead of the release.

Likewise, stocks are cheering the news, with the ASX 200 up 0.7%, after sitting about 0.2% higher in early trade.

Among the early reaction to the data, AMP Capital senior economist Shane Oliver tweeted that the steady level for the jobless rate is a better indicator than the up-and-down moves in employment numbers.

Oliver said last month’s data seemed too weak, and this month’s seem too strong, while the “truth is [in] between.”

Would a raft of upcoming Chinese data help put markets in reverse gear after last week’s trade data stoked slowdown fears?

It appears investors are a bit dubious of any big surprises, as Hong Kong’s Hang Seng Index seesaws in early trading (it’s now 0.3% higher).

China is scheduled to release industrial production and retail sales numbers later in the day. Last week, it reported an unexpectedly sharp fall of 18.1% in its exports for February, swinging the country’s trade balance into a deficit and sending jitters across global markets.

Meanwhile, most mainland Chinese banks are recovering some of their losses after sharp declines in the prior session: China Construction Bank has advanced 0.8%, and Industrial & Commercial Bank of China is up 0.7%.

China Citic Bank Corp. is extending gains by another 1.4%, as buyers appear bullish on the bank’s reported move to team up with online majors Tencent and Alibaba, respectively, and offer virtual credit cards for China’s online shopping fans.

However, shares of Tencent are a bit soft, down 0.3% at 600 Hong Kong dollars ($77).

On the mainland, the Shanghai Composite rose back above the 2,000 mark, up 1.2% at 2,004.09.

The last of the big monthly Chinese data releases is due today at 1:30 p.m. Beijing time (1:30 a.m. U.S. Eastern time). And this set of numbers will be all the more interesting in that it covers both January and February, so as to cancel out seasonal distortions from the Lunar New Year. A double whammy, so to speak.

The data set will offer:

Retail sales — The Dow Jones Newswires survey is tipping a gain of 13.5% from a year earlier; December saw a rise of 13.6%.

Industrial output — Dow Jones reports a forecast rise of 9.5% from a year earlier; December’s output was up 9.7%.

Urban fixed-asset investment — Basically a measure of contruction spending; Dow Jones projects a 19.3% gain; the measure is only reported on a year-to-date basis, and 2013 had a rise of 19.6%.

“The markets are already fearful of a Chinese slowdown, and today’s data will do little to calm those fears, with most of them displaying further weakness,” writes Société Générale in a note out today.

“Retail sales are being depressed by the anti-corruption drive and disinflation, while rising inventories will weigh on industrial production. … The figures are likely to add to doubts over the achievability of the official 2014 gross domestic product [growth] target of 7.5%,” SocGen says.

Crédit Agricole is also looking for weaker numbers, and like SocGen, they see some negative market reaction as possible: “While such softer outcomes [in the data] should be close to consensus, they nevertheless will add to the concerns over the growth outlook.”

Markets gave a thumbs-up to Chinese Premier Li Keqiang’s strong faith in Chinese economy as he spoke at a news conference marking the end of China’s annual legislative session: The Shanghai Composite went from a 0.5% gain to a 1.3% rally, while Hong Kong’s Hang Seng Index also extended its gainto rise 0.5%.

Specifically, Li stood by the government’s 7.5% economic growth target for this year, even as some economists doubt this will be achieveable absent significant stimulus.

“The Chinese economy has great potential and resilience. We are capable of, and have the conditions to make sure the economy runs within a reasonable range,” he said. “Without addional short-term stimulus measures, we achieved the growth target last year. Why can’t we do it this year?”

He also said Chinese officials are paying great attention to debt risks and have set a timetable for regulatory measures on the nation’s informal “shadow-banking” sector.

Li said that although some defaults of financing vehicles may be unavoidable, China would closely monitor the situation and make sure there are no “regional and systemic financial risks.”

China’s industrial production slowed to 8.6% in the January-February period, compared to 9.7% in December, while retail-sales growth also eased to 11.8% from 13.6% in December, the National Bureau of Statistics said Thursday.

Both data failed to meet the forecasts, as markets expected the industrial output to grow 9.5% and retail sales to expand 13.5% in the period, according to a Dow Jones Newswires poll of economists.

In a Thursday note ahead of the data release, ananlysts from Société Générale said Chinese retail sales may be “depressed by the anti-corruption drive and disinflation,” while rising inventories have weighed on industrial production.

The markets took a hit after the data, as Hong Kong’s Hang Seng Index turned down to a loss of 0.5% from a gain of 0.2%, while the Shanghai Composite trimmed its 1% gain to trade 0.6% higher.

Japanese stocks also saw their gains vanish, with the Nikkei Average ending 0.1% lower, while the Australian dollar — often sensitive to economic news out of China — eased to 90.48 U.S. cents from 90.62 U.S. cents.

Shanghai markets seemed to have shrugged off soft Chinese data and got a boost from reports that the country may allow companies to issue first preferred shares in the second half of the year, without adding pressure on stock investors. The Shanghai Composite Index stood out in Asian markets with a 1.1% gain, with bank shares among the biggest winners.

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